Stocks: Why the end of ‘extend and pretend’ is coming

The conclusion of the era where central banks "extend and pretend" about the state of the global economy is on its way in the third quarter, as central banks start to unwind stimulus programs, according to a contrarian economist.

"The market is realizing that interest rates and everyone related to the interest rate cycle are in a vacuum where nothing is happening," Steen Jakobsen, chief economist of Saxo Bank, told CNBC Friday.

"On the other hand, real companies like Cisco, Walmart are indicating that the real world looks far more bleak."

He highlighted the problems for small and medium-sized businesses in gaining access to credit, and argued that, for a real recovery to begin, they have to be able to invest to create new jobs.

Three of the developed world's most influential banks: the U.S. Federal Reserve, European Central Bank and the Bank of England have embarked on large injections of liquidity into the market in recent years, which have been credited with staving off a global economic depression.